Godrej Agrovet Ltd (GAVL), which is part of Godrej Industries Ltd (GIL), has put its proposal to enter the drip irrigation sector on hold citing adverse drip irrigation market conditions.
However GAVL said it would monitor the industry conditions and keep an open mind about future entry into the sector.
In a presentation made by GIL at an investor and analyst meet held recently, a copy of which was made available to the stock exchanges, the company said GAVL had evaluated various opportunities in the sector. This included potential acquisitions, joint ventures and greenfield operations.
During this time, ‘drip irrigation market conditions have steadily worsened' and subsidies were ‘bottlenecked by State governments', the receivables by drip irrigation companies have skyrocketed and many ‘commoditised players' have entered the market. The company said that in the ‘light of changing circumstances', GAVL had decided to put its foray into drip irrigation activity ‘on hold'.
It said ‘for the time being', GAVL would focus on distribution of high quality drip irrigation to its oil palm farmers across the country. GAVL would continue to monitor the drip irrigation industry conditions, “keeping an open mind regarding future market entry”, the company said in its presentation. Godrej Industries said GAVL's oil palm sales had been witnessing a rapid rise and from Rs 115 crore in FY 2010-11, it had jumped to Rs 224 crore during the last year, a 94.3 per cent increase. During 2011-12, more than 7,000 hectares of new area was brought under oil palm cultivation by GAVL including States such as Gujarat, Karnataka and Maharashtra.
This was a sharp jump over the two previous years when the new areas brought under oil palm cultivations were much less – 4,751 hectares in 2009-10 and 3,993 hectares in 2010-11.
Outlining priorities for oil palm cultivation, GAVL said that increasing area of cultivation, especially in Tamil Nadu, Maharashtra and Gujarat, launching oil palm R&D focussing on harvesting and intercropping and distribution of high quality fertiliser and drip irrigation to oil palm farmers, were some of the activities it would focus on.